IMF edges up 2026 global growth forecast to 3.1 pct as Mideast conflict, AI boom split world economy

The International Monetary Fund (IMF) on Tuesday nudged its 2026 global growth forecast to 3.1 percent, up 0.1 percentage point from its July projection, as economies lifted by the artificial intelligence (AI) investment boom offset those hurt by the Middle East conflict.

In its latest World Economic Outlook, titled "Resilience Under Strain, Urgent Choices," the IMF projected global growth slowing from 3.5 percent in 2025 to 3.1 percent in 2026 before recovering to 3.4 percent in 2027. The 2027 figure is unchanged from the July forecast and 0.2 percentage points higher than the April forecast.

The IMF said growth is becoming more concentrated. Just 32 economies now account for 95 percent of global growth, down from 54 in April. Roughly 47 percent of economies had their forecasts downgraded.

The fund described the world economy as neither simply slowing nor accelerating but having growth reallocated according to each country's exposure to the war-driven energy shock and to AI-related demand.

The strongest performers combine limited energy vulnerability with deep ties to the AI hardware supply chain. By contrast, energy importers with little connection to the technology cycle, including many low-income countries, face the hardest mix of higher import bills, weaker currencies, and falling real incomes.

The IMF's baseline assumes the Strait of Hormuz reopens in March 2027, with conditions broadly returning to prewar levels by October 2027. Before the war, the strait carried about a quarter of the world's seaborne oil trade.

The fund estimated that closing the strait would have cut global growth by 0.9 percentage points this year without offsetting supply responses. Rerouted Gulf output, higher production elsewhere, inventory drawdowns, and a lower oil intensity of the world economy reduced the net hit to about 0.3 percentage points.

Saudi Arabia's 2026 outlook was cut by 5 percentage points from July to a 3.3 percent contraction. Meanwhile, Bahrain, Iraq, Kuwait, and Qatar, commodity producers most affected by disruptions to energy output and transport, are expected to shrink by double digits this year.

The IMF warned that inventories are being depleted toward stress levels that could trigger sharp price jumps. Oil prices are assumed to average 95.74 U.S. dollars a barrel in 2026, up about 41 percent from 2025, and 87.39 dollars in 2027.

Global headline inflation is now forecast to rise from 4.1 percent in 2025 to 4.7 percent in 2026 before easing back to 4.1 percent in 2027.

Compared with its April projections, the fund raised its inflation forecasts by 0.3 percentage points for 2026 and 0.4 percentage points for 2027.

Core inflation is not expected to return to 2 percent until the end of 2027 in Japan and Britain and mid-2028 in the euro area and the United States.

Among major economies, U.S. growth is forecast at 2.3 percent in both 2026 and 2027, supported by consumption, fiscal policy, and technology investment. The euro area is seen growing 1.1 percent this year and 1.2 percent next, reflecting the continued drag of high energy prices and weak consumer confidence.

India's growth is projected at 7.0 percent in both years. Japan is forecast at 0.7 percent and Britain at 1.3 percent for 2026.

IMF edges up 2026 global growth forecast to 3.1 pct as Mideast conflict, AI boom split world economy

China will cut the value-added tax (VAT) export rebate rate for new energy vehicles (NEVs) to 9 percent from 13 percent and scrap rebates for e-cigarette devices from April 1, 2027, the Ministry of Finance and the State Taxation Administration said on Monday.

Export consumption tax policies for products subject to the tax will remain unchanged, with existing refund and exemption arrangements continuing to apply, the statement said.

The change continues China's optimization of export tax rebate policies. The country scrapped VAT export rebates for photovoltaic products from April 1, 2026, and cut the rebate rate for battery products to 6 percent from 9 percent on the same date, with battery rebates to be eliminated from Jan. 1, 2027.

The move comes as China's NEV sector continues to expand rapidly, with automakers increasingly looking to overseas markets for growth. China is the world's largest market for NEVs, a category covering battery-electric and plug-in hybrid vehicles.

China exported 1.05 million vehicles in September, up 61.4 percent year on year, including 571,000 NEVs, more than double the number a year earlier. NEVs accounted for more than half of total vehicle exports for the fourth consecutive month.

The shift is even more pronounced in the domestic market, where NEVs have become the dominant force, making up a record 62 percent of new car sales in September, according to the China Association of Automobile Manufacturers. More broadly, in the first three quarters of 2026, NEV output and sales each reached around 12.5 million units, up 11 percent year on year, with NEVs accounting for more than half of total new car sales.

China to cut NEV export tax rebate rate to 9 pct from April 2027